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Insurance-Linked Securities Increasingly Important To Reinsurers: S&P

Reinsurers are increasingly turning to third-party capital to support their retrocession needs amid rising catastrophe losses, a new report has shown.

According to S&P Global Ratings, nearly 15 percent of total reinsurance capital is sourced through insurance-linked securities (ILS) issuances, while the share is increasing significantly within the retrocession market.

“In 2021, they ceded about 50 percent of their exposures at a 1-in-250 return period through collateralised instruments, such as insurance-linked securities (ILS),” said S&P’s credit analyst Maren Josefs.

ILS is expected to increase its market share over the next few years as innovative new issuances address new risks, such as cyber, climate change, and environmental, social and governance (ESG), predicts the agency.


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